Ganpati Herbal Care (P) Ltd., New Delhi V. Pr.CIT- 4 , New Delhi

ITA 2056/DEL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4740 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 115JB; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES: C: NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.2056/DEL/2018 ASSESSMENT YEAR: 2013-14 GANPATI HERBAL CARE (P) LTD., 2, SSI INDUSTRIAL AREA, GT KARNAL ROAD, NEW DELHI. PAN: AACCG1865C VS. PR. CIT-4, NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI V.K. BINDAL, CA DEPARTMENT BY : SHRI ARUN KUMAR YADAV, SR. DR DATE OF HEARING : 02.08.2018 DATE OF PRONOUNCEMENT : 02.08.2018 ORDER PER R.S. SYAL, VP : THE PRESENT APPEAL BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 28.02.2018 PASSED BY THE CIT U/S 263 OF THE I NCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) IN RELATIO N TO THE ASSESSMENT YEAR 2013-14. 2 ITA NO.2056/DEL/2018 2. BRIEFLY STATED, THE FACTUAL MATRIX OF THE CASE I S THAT THE RETURN WAS FILED BY THE ASSESSEE DECLARING INCOME OF RS.16 ,25,380/-. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT BY ASSESSING IT AT THE RETURNED INCOME UNDER THE NORMAL PROVISIONS AND AT RS.88,72,129/- U/S 115JB OF THE ACT. THE LD. CIT F OUND THE ASSESSMENT ORDER HAVING BEEN PASSED WITHOUT EXAMINA TION OF CLAIM OF DEDUCTION U/S 80-IC OF THE ACT. HE NOTICED THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 19.08.2004 AND IT COMMENCED ITS OPERATIONS ON 29.03.2010. HE FURTHER NOTICED THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMENT YEAR, NAM ELY, 2014-15, IT TRANSPIRED THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITY FROM PARWANOO AREA PRIOR TO THE SETTING UP OF THE PRESEN T MANUFACTURING UNIT. THE ASSESSEE WAS ALSO FOUND TO HAVE STATED I N ITS REPLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y.20 14-15 THAT PRIOR TO SETTING UP OF NEW MANUFACTURING UNIT IN THE NOTI FIED AREA IN THE STATE OF HIMACHAL PRADESH, IT WAS HAVING A MANUFACT URING UNIT ON A VERY SMALL SCALE SITUATED IN THE PREMISES OF A FAMI LY-OWNED UNIT RUN UNDER THE NAME OF BCI OPTICAL DISC LTD. AT KUNDLI, HARYANA. THE LD. CIT FOUND THE CLAIM OF THE ASSESSEE FOR DEDUCTION U /S 80IC FOR THE 3 ITA NO.2056/DEL/2018 INSTANT YEAR AS CONTRARY TO THE DOCUMENTS FILED BY IT BEFORE THE REGISTRAR OF COMPANIES, WHICH EVIDENCED THAT IT WAS NOT A CASE OF SETTING UP OF NEW INDUSTRIAL UNIT, BUT THAT OF RE-O RGANISATION OF BUSINESS ALREADY IN EXISTENCE. SINCE THE ASSESSMEN T ORDER WAS PASSED WITHOUT MAKING ANY ENQUIRY ON THE ELIGIBILITY OF DE DUCTION U/S 80IC, THE LD. CIT SET ASIDE THE SAME TO BE DONE AFRESH BY THE AO. THE ASSESSEE IS AGGRIEVED AGAINST SUCH DECISION. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. IT CAN BE SEEN THAT THE ASSESSMENT ORDER PASSED IN FEBRUARY, 2016 DOES NOT CONTAIN ANY DISCUSSION WHATSOEVER ON THE ELIGIBILITY OF DEDUCTION U/S 80IC OF THE ACT. IT IS FURTHER RELEV ANT TO MENTION THAT THE ASSESSEE COMMENCED ITS OPERATIONS FROM 29.03.20 10 AND, THUS THE `INITIAL YEAR FOR THE PURPOSES OF DEDUCTION IS A.Y . 2010-11. NO CLAIM FOR DEDUCTION WAS MADE FOR SUCH INITIAL ASSESSMENT YEAR AS THERE WAS NO INCOME FROM THE ELIGIBLE UNIT. IT WAS FOR THE FI RST TIME THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IC FOR THE A.Y. 20 11-12, WHICH IS APPARENT FROM THE COMPUTATION OF INCOME, WHOSE COPY HAS BEEN PLACED AT PAGE 328 OF THE PAPER BOOK. IN THE NEXT YEAR ALSO, NAMELY, A.Y. 2012-13, THE ASSESSEE CLAIMED DEDUCTION U/S 80 IC AS IS APPARENT 4 ITA NO.2056/DEL/2018 FROM THE COMPUTATION OF INCOME FOR SUCH YEAR, WHOSE COPY HAS BEEN PLACED AT PAGE 337 OF THE PAPER BOOK. THE A.Y. UND ER CONSIDERATION IS 2013-14, BEING, THE THIRD YEAR OF CLAIM U/S 80IC . THE LD. CIT HAS HELD THE ASSESSEE TO BE NOT ELIGIBLE FOR DEDUCTION U/S 80IC ON THE GROUND THAT THE ELIGIBLE UNIT WAS FORMED BY RECONST RUCTION OF A BUSINESS ALREADY IN EXISTENCE. THUS, IT IS APPAREN T THAT THE ONLY RAISON DETRE FOR THE REVISION OF THE ASSESSMENT ORDER IS THE N ON-FULFILMENT OF THE ELIGIBILITY CONDITION OF NOT SETTING UP A NEW B USINESS. 4. RECENTLY, THE HONBLE SUPREME COURT HAS DELI VERED A JUDGMENT IN DCIT VS. ACE MULTI AXES SYSTEMS LTD. (2018) 400 ITR 141 (SC) ON THE ELIGIBILITY OF DEDUCTION U/S 80IBOF THE ACT. TH E ASSESSEE IN THAT CASE WAS ORIGINALLY ALLOWED DEDUCTION U/S 80-IB, WH ICH SECTION CONTAINED ONE OF THE CONDITIONS AS THE ASSESSEE BEI NG A SMALL SCALE INDUSTRY (SSI). IN THE RELEVANT YEAR UNDER CONSIDE RATION, THE ASSESSEE CEASED TO BE A SSI. THE AO DENIED THE BENEFIT OF DE DUCTION. THE HONBLE HIGH COURT FORMULATED THE QUESTION : `WHEN ONCE THE ELIGIBLE BUSINESS OF AN ASSESSEE IS GIVEN THE BENEF IT OF DEDUCTION UNDER SECTION 80 IB ON THE ASSESSEE SATISFYING THE CONDIT IONS MENTIONED IN 5 ITA NO.2056/DEL/2018 SUB-SEC. (2) OF SECTION 80 IB, CAN THE ASSESSEE BE DENIED THE BENEFIT OF THE SAID DEDUCTION ON THE GROUND THAT DURING THE SA ID 10 CONSECUTIVE YEARS, IT CEASES TO BE A SMALL SCALE INDUSTRY? TH E HONBLE HIGH COURT ANSWERED IT IN FAVOUR OF THE ASSESSEE, AGAINS T WHICH THE REVENUE PREFERRED AN APPEAL BEFORE THE HONBLE SUPR EME COURT. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT ONCE T HE STIPULATED CONDITIONS WERE SATISFIED IN THE INITIAL YEAR, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S 80IB IN ALL THE SUBSEQUEN T YEARS NOTWITHSTANDING IT CEASING TO BE A SMALL SCALE INDU STRY. REJECTING SUCH A CONTENTION, THE HONBLE SUPREME COURT HELD T HAT IF AN INDUSTRIAL UNDERTAKING DOES NOT REMAIN SMALL SCALE UNDERTAKING, IT CANNOT CLAIM THE INCENTIVE. IT WENT ON TO HOLD THAT : ` NO DOUBT, CERTAIN QUALIFICATIONS ARE REQUIRED ONLY IN THE INITIAL ASS ESSMENT YEAR, E.G. REQUIREMENTS OF INITIAL CONSTITUTION OF THE UNDERTA KING. CLAUSE 2 LIMITS ELIGIBILITY ONLY TO THOSE UNDERTAKINGS AS ARE NOT F ORMED BY SPLITTING UP OF EXISTING BUSINESS, TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED . THEN IT OBSERVED THAT : `CERTAIN OTHER QUALIFIC ATIONS HAVE TO CONTINUE TO EXIST FOR CLAIMING THE INCENTIV E SUCH AS EMPLOYMENT OF PARTICULAR NUMBER OF WORKERS AS PER S UB-CLAUSE 4(I) OF 6 ITA NO.2056/DEL/2018 CLAUSE 2 IN AN ASSESSMENT YEAR. FOR INDUSTRIAL UNDE RTAKINGS OTHER THAN SMALL SCALE INDUSTRIAL UNDERTAKINGS, NOT MANUFACTUR ING OR PRODUCING AN ARTICLE OR THINGS SPECIFIED IN 8TH SCHEDULE IS A REQUIREMENT OF CONTINUING NATURE. THIS IS HOW, THE HONBLE SUPREM E COURT LAID DOWN THAT AN INCENTIVE MEANT FOR SMALL SCALE INDUST RIAL UNDERTAKINGS CANNOT BE AVAILED BY INDUSTRIAL UNDERTAKINGS WHICH DO NOT CONTINUE AS SMALL SCALE INDUSTRIAL UNDERTAKINGS DURING THE RELE VANT PERIOD. THUS, IT IS GRAPHICALLY CLEAR FROM THE JUDGMENT THAT THERE A RE TWO TYPES OF CONDITIONS, WHICH NEED TO BE EXAMINED. FIRST ARE TH E CONDITIONS, WHICH NEED TO BE EXAMINED ONLY IN THE INITIAL YEAR, SUCH AS, CONSTITUTION OF UNDERTAKING- WHETHER A NEW ONE OR R ECONSTRUCTION. SECOND ARE THE CONDITIONS, WHICH NEED TO BE EXAMINE D EVERY YEAR BEFORE ALLOWING DEDUCTION, SUCH AS, THE UNIT CONTIN UING TO REMAIN SSI AND EMPLOYING SPECIFIED NUMBER OF EMPLOYEES EVERY Y EAR. ONCE THE FIRST SET OF CONDITIONS ARE ESTABLISHED IN THE INIT IAL YEAR, THESE SHOULD NOT BE EXAMINED IN LATER YEARS. ON THE OTHER HAND, THE SECOND SET OF CONDITIONS HAVE TO BE ESTABLISHED BY THE ASSESSEE E VERY YEAR. 7 ITA NO.2056/DEL/2018 5. ON A PARITY WITH SECTION 80IB CONSIDERED BY T HE HONBLE APEX COURT, WHEN WE TURN TO SECTION 80-IC OF THE ACT UND ER CONSIDERATION, IT IS FOUND THAT SUB-SECTION (2) CONTAINS A CONDITI ON THAT THIS SECTION APPLIES TO AN UNDERTAKING OR ENTERPRISE, (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE, ETC. O R (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTIC LE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE. SUB-SECTION ( 4) PROVIDES THAT THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRI SE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: (I) IT IS NOT FO RMED BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE. (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MAC HINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. ON AN ANALOGY DRA WN FROM THE JUDGMENT IN ACE MULTI AXES SYSTEMS LTD. (SUPRA), IT CAN BE EASILY SEEN THAT THE CONDITION OF MANUFACTURING ARTICLE OR THING, (A) NOT BEING AN ARTICLE SPECIFIED IN THE THIRTEENTH SCHEDU LE OR (B) ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE, NEED S TO BE FULFILLED ON YEAR TO YEAR BASIS. HOWEVER, THE CONDITION OF NOT FORMED BY SPLITTING UP, OR THE RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE OR BY THE 8 ITA NO.2056/DEL/2018 TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PR EVIOUSLY USED FOR ANY PURPOSE, ARE REQUIRED TO BE ESTABLISHED IN THE INITIAL YEAR ALONE. 6. ADVERTING TO THE FACTS OF THE INSTANT CASE, W E FIND THAT THE INITIAL YEAR OF THE ASSESSEE FOR THE PURPOSES OF DEDUCTION U/S 80IC IS A.Y. 2010-11. DEDUCTION WAS ACTUALLY CLAIMED FOR THE FIR ST TIME IN A.Y. 2011-12 AND THEN IN A.Y. 2012-13. SUCH A DEDUCTION WAS ALLOWED BY THE REVENUE ALBEIT WITHOUT MAKING A REGULAR ASSESSMENT U/S 143(3). SINCE THE STAGE FOR CARRYING OUT INVESTIGATION FOR ASCERTAINING IF THE UNIT WAS NEWLY SET UP OR RECONSTRUCTED, WAS THE INI TIAL YEAR, IN WHICH THE ASSESSEES CLAIM WAS NOT DISPUTED, THE ASSESSME NT ORDER FOR THE YEAR UNDER CONSIDERATION, ACCEPTING FULFILMENT OF T HIS ELIGIBILITY CONDITION, CANNOT BE CONSTRUED AS ERRONEOUS. GOING BY THE ABOVE INTERPRETATION OF THE PROVISION, THE AO WAS PRECLUD ED FROM EXAMINING AS TO WHETHER THE ASSESSEE SET UP ITS NEW UNIT OR I T WAS A REORGANISATION OF THE EXISTING UNIT IN THE RELEVANT YEAR. THE ASSESSMENT ORDER NOT DISCUSSING THE EXAMINATION OF SUCH A COND ITION CANNOT BE TERMED AS ERRONEOUS. ONCE AN ASSESSMENT ORDER CANN OT BE HELD AS ERRONEOUS, THE CIT CANNOT EXERCISE REVISIONAL POWER U/S 263, WHICH REQUIRES A CUMULATIVE SATISFACTION OF THE TWIN COND ITIONS, VIZ., THE 9 ITA NO.2056/DEL/2018 ERRONEOUS ASSESSMENT ORDER AND THE SAME BEING PREJU DICIAL TO THE INTEREST OF THE REVENUE. 7. EVEN THOUGH THE AMBIT OF SECTION 263 HAS BEE N EXPANDED BY MEANS OF INSERTION OF EXPLANATION 2, WHICH, INTER ALIA, SAYS THAT AN ORDER PASSED ALLOWING ANY RELIEF WITHOUT ENQUIRING INTO ANY CLAIM OR AN ORDER PASSED WITHOUT ANY ENQUIRIES OR VERIFICATI ON WHICH SHOULD HAVE BEEN MADE, SHALL BE COVERED WITHIN THE PURVIEW OF SECTION 263, A CLAIM WHICH PER SE DOES NOT REQUIRE ANY ENQUIRY AND THE AO ACCEPTING THE SAME WITHOUT CONDUCTING SUCH ENQUIRY, CANNOT BE BROUGHT WITHIN THE SCOPE OF SECTION 263. THE CIT WO ULD HAVE BEEN JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 , IF THE AO HAD PASSED SUCH ORDER FOR THE `INITIAL YEAR WITHOUT MA KING RELEVANT ENQUIRY. EXTANTLY, WE ARE CONFRONTED WITH A SITUATI ON IN WHICH THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE THIRD YE AR OF THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT. HAVING ALLOWED SUCH DEDUCTION IN THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS, THE AO WAS NOT SUPPOSED TO RE-EXAMINE THE ELIGIBILITY CONDITION OF THE NEW UNIT HAVING BEEN SET UP IN THE CURRENT YEAR AS WELL. IN THIS VIEW OF THE MATTER, THE IMPUGNED ORDER SETTING ASIDE SUCH AN AS SESSMENT ORDER ON 10 ITA NO.2056/DEL/2018 THE GROUND THAT THE AO DID NOT EXAMINE SUCH ELIGIBI LITY CONDITION IN THE THIRD YEAR, WHICH OUGHT TO HAVE BEEN EXAMINED I N THE INITIAL YEAR, CANNOT BE SUSTAINED. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.201 8. SD/- SD/- [JOGINDER SINGH] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 02 ND AUGUST, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.